What’s Your Value Proposition?

Do you know why your customers pull your products or services into their lives?

In the 90’s McDonald’s was trying to increase the sales of it’s milkshakes, with the customer data available to them, the marketing department was able to map out a demographic profile of the quintessential milkshake customer. Armed with this profile, they spent months inviting customers who fit the profile of the quintessential milkshake consumer. They’d give them milkshake samples and ask, “Could you tell us how we could improve our milkshakes so you’d buy more of them? Do you want it chocolate-ier, cheaper, chunkier, or chewier?”

The customers would provide clear feedback and McDonald’s would improve the milkshake on those dimensions but the improvements did not result in increased sales of the milkshakes. This was a big conundrum for the marketing department at McDonald’s.

This conundrum is not new, Peter Drucker figured this out when he said, the customer rarely buys what the company thinks it’s selling.

About two weeks back, I stumbled on this tweet and it really mirrored the state of many businesses in Nigeria. Although I would rephrase by saying we have too many businesses with no knowledge of the exact value proposition they offer to their customers. This conundrum has grave consequences such as an inability to grow sales which is evident in the McDonald’s situation, another consequence is the inability to compete strategically because the business cannot identify why consumers buy your products it hence the identificationication of substituteof all substitute brands and products become impossible. I am certain you must be thinking, we have our value proposition on lock down and we know our competitors but what is your level of certain? McDonald’s thought the competitors for its Milkshake were other Milkshakes from other fastfood outlets, but the competitor turned out to be easily consumable breakfast foods like bagels or bananas.

Finally McDonald’s brought in two consultants to examine the problem becomes very slim.

After the marketing department hit the iceberg, McDonalds invited two consultants who approached the problem using the jobs to be done theory which implied that customers hire products to do jobs in their lives when those jobs arise. So why were customers hiring the milkshake, what job did customers need a milkshake to handle? The consultants observed that half of the Milkshakes were sold before 8:30 in the morning, so they began asking the consumers why they were coming to McDonalds to buy Milkshakes at 6:30 in the morning and what other products they would buy instead. And it turned out, that they all had the same job to do. That is, they had a long and boring drive to work. And they just needed something to have while they were driving to stay engaged with life and not fall asleep.

The customers had answers like:

I’m not hungry yet, but I know I’ll be hungry by 10:00. So I also need something that will just go thunk and stay there for the morning. So what do I hire to get that job done when I don’t hire a milkshake? And one guy said, you know, I never thought about it this way before, but last Friday, I hired a banana to do the job.

Take my word for it– never hire bananas. They’re gone in less than a minute, you’re hungry by 7:30. Yeah, as you can say, I hire donuts a lot. I can never hire just one. But that creates problems on their own.

And I do bagels sometimes, but bagels are dry and tasteless. And so I have to steer the car with my knees while I put the cream cheese on.

These insights helped McDonalds improve their Value Proposition in line with the Job to be done, so they gave out prepaid cards which allowed for customers to dash in and avoid a queue when getting the milkshakes so as not to be late for work, they also made the Milkshake thicker so it could last the drive to work. This increase sales by 700 percent.

Another crucial question these insights helped solve was identifying competing products which were not just milkshakes from other fast fast food chains but bananas, donuts and bagels.

If you are looking to identify, design and improve your Value Proposition in order to increase sales and compete strategically you can reach out to us at Owens & Xley Consults today at info@owensxley.com.

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